Finance Minister Arun Jaitley has often said that he is not in favour of burdening the salaried and middle class with more taxes, raising hopes of tax breaks in Saturday's Budget. Expectations of tax relief are high because Mr Jaitley's first Budget led to tax savings of about Rs. 40,000 for those in the highest tax bracket last year.

In his first Budget presented in July 2014, the finance minister not only increased income tax exemption from Rs. 2 lakh to Rs. 2.5 lakh, but he also hiked the exemption ceiling on home loan interest to Rs. 2 lakh from Rs. 1.5 lakh. The limit of savings permitted under Sector 80C was hiked from Rs. 1 lakh to Rs. 1.5 lakh.

Tax payers would want a repeat this year as the fall in fuel prices gives the government the elbow room to ease taxes.

Here's what economists expect on the tax front:

Direct Tax:

1) Income tax exemption limit for individuals could be raised, says Credit Suisse. Domestic research agency ICRA also expects upward revision in slabs for personal income tax to offset the impact of inflation and support consumption growth. (Current income tax slabs are Rs. 2.5 lakh to Rs. 5 lakh: 10 per cent; Rs. 5 lakh to Rs. 10 lakh: 20 per cent; Rs. 10 lakh and above: 30 per cent.)

2) Income tax deduction under Section 80C: According to Nomura, Mr Jaitley is likely to increase the exemption limit under section 80C (currently at Rs. 1.50 lakh per annum) to channel more household savings into long-term financial savings.

3) Tax exemption on home loan principal: Principal repayment on home loans could be raised from Rs. 1.5 lakh to Rs. 3 lakh, says Angel Broking. This will improve affordability of properties and induce home buyers, thereby benefitting residential housing segment, the domestic brokerage added.

4) Tax exemption on home loan interest: According to Care Rating, there could be an increase in the deduction limit on account of interest on loan for self-occupied house property from Rs. 2 lakh to Rs. 3 lakh.

5) Allowances: Analysts have pointed that many allowances have not changed for years. The limits on conveyance allowance (Rs. 800 per month), children education allowance (Rs. 100 per month) and reimbursement of medical expenditure (Rs. 1,250 per month) were set in 1998, says Shalini Jain of EY.

Indirect Tax:

The relief on direct taxes may be neutralised to some extent by raising taxes on goods and services, analysts say.

6) Service tax: According to Nomura, the government could hike the service tax rate from 12 per cent to 14 per cent as an intermediate step for implementing the Goods and Services Tax. This could make phone calls costlier. Eating out in restaurants, gym and club membership would also cost more.

7) Custom duties on crude may be reimposed to raise more revenues, according to ICRA. This will lead to higher petrol and diesel prices.

8) Excise duty is unlikely to be cut for automobiles, which means there will be no reduction in car and bike prices, Morgan Stanley says. However, the Budget could provide incentives for replacement of old vehicles, the investment bank added.

9) StanChart, quoting media reports, says cooking gas subsidies granted to recipients in the 20 per cent or 30 per cent income-tax brackets will likely be eliminated. So those in higher tax brackets may have to pay market prices for LPG.

10) Gold prices may not come down as the government may retain record high import duty of 10 per cent. With the restrictions on import of gold having been eased post the withdrawal of the 20:80 scheme, we expect customs duty on gold to be retained in order to encourage financial savings, ICRA said.